Lying With Statistics...

English statesman Benjamin Disraeli quoted the following (which was later popularized by Mark Twain): “There are three kinds of lies: Lies, damned lies and statistics.”

A professor of mine a few semesters ago appropriately expanded the list to six categories: “Lies, white lies, damned lies, statistics, government statistics, and campaign promises.”

It is the 5th dimension of lies that I’d like to focus on – government statistics. More specifically the statistics provided by the Bureau of Labor Statistics (BLS).

First, for some understanding – the BLS is a unit of the US Department of Labor and is the principal fact-finding agency for the U.S. government in the broad field of labor economics and statistics. They produce surveys, indices and statistics in 4 main categories: prices, employment/unemployment, Compensation and Working Conditions, and Productivity. If you want to read a little more, see this for an overview.

Today we’ll tackle employment statistics. Why? Because it’s a big indicator used to gauge the health of our economy, used in determining policy decisions (both monetary and fiscal), you'll see Wall Street react favorably or unfavorably to it upon the day numbers are released, and it's shouted from the rooftops by all major media when it’s released, thus influencing the minds of the public.

Mainstream media reports the U-3 unemployment rate, which uses a monthly household survey. This is the “unofficial” but official unemployment rate – used by the government and the Federal Reserve. Now, we can take the rate we’re fed by the media, politicians, and the Fed at face value, or like good citizens can dig a little deeper to see what bull we’re being fed.

The official November 2010 number we were given was 9.8% unemployment.

Now let’s dig into the data. I’ll try and make this as simple as possible and guide you through it, but like all good government statistics, it’s confusing for a reason (ha!). I’ll also try and post snapshots of the data if you don’t want to scroll through the linked site.

Go to this site if you'd like the full document (or just look at the charts below for the referenced excerpts). If the link doesn’t open, cut and paste the following into your browser: http://www.bls.gov/news.release/pdf/empsit.pdf

On page 1, you’ll see a summary and some charts. Under the charts you’ll see 15.1 million are unemployed which is 9.8%. Wow - the media can read! They got it right! Feel encouraged that your major media has a brain stem!

Click on the chart and it should open larger in a new window.


Now you can read through all the charts and tables and put yourself to sleep, or can now skip down to page 27 of the document – “Household Data – Table A-15. Alternative measures of labor underutilization”. Like I said, I’ll try and make it easy for you…

“Alternative measures of labor underutilization” – that sounds interesting…what could that be?


Look down the left hand side under “measure”. See U-1, U-2, U-3, etc.? And what did we say, the media, government, and Fed use? U-3 numbers. Now scan across to November 2010 under “seasonally adjusted”. See 9.8??? Great! We’d just matched it up again. 9.8% unemployment.

But wait. What are all these other “U” measurements about? Look at U-5 and U-6. U-5 reports 11.3% and U-6 reports 17.0%. What’s up? Those are much higher than 9.8%.

Read the descriptions:

• U-5 – Total unemployed (U-3 number), plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force.


• U-6 – Total unemployed, plus all persons marginally attached to the labor force, plus total unemployed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.

Now you might be asking the following…”Umm, what is a ‘discouraged worker’, ‘persons marginally attached’, and ‘unemployed part time for economic reasons’”? Good question.

Read the “Note” below the chart.

• Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.
• Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work.
• Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.

I know, your brain is percolating with questions now. Hold on just another second. One more data table. Go to the next page down – “Table 1-16 – Persons not in the labor force…”


Our mysterious categories actually fall into a larger category of “Not In the Labor Force” or “NILFs”.

Footnote 2 gives a little more data on our beloved “discouraged worker”:

• Includes those who did not actively look for work in the prior 4 weeks for reasons such as thinks no work available, could not find work, lacks schooling or training, employer thinks too young or old, and other types of discrimination.

Okay, so ask your question now – the one that’s been bubbling in your mind…

“Why aren’t the U-5 or U-6 numbers reported instead of the U-3 number? Shouldn’t persons ‘marginally attached’, ‘discouraged workers’ and ‘persons employed part-time for economic reasons’ (also referred to as ‘underemployed’) be included in the official numbers? If they actually are NILFs, why aren’t they included? All categories sound like they are ‘unemployed’!”

Bingo! And there you have it! Our 5th dimension of lying: Government statistics!

Your guess is as good as mine why the numbers are reported this way. One of those, “how many licks does it take to get to the center of a Tootsie Pop?” kind of questions…”the world will never know.” But I’d bet political motivation is high at the top of the list, however. You think those in power want 17% unemployment hanging over their heads during elections? Or perhaps the general population would just flat out revolt…

Think 11.3% or 17% unemployment sounds crazy? Check out the projections from the Center For Working-Class Studies at Youngstown State University here. They have unemployment pegged at 26.9% for August of this year (civilian population), compared to the 9.6% official unemployment figure for August. Think unemployment of 1/4 of the working population would be palatable for many?

Could the government BLS be fudging the numbers? Could the media be less intelligent than we think in their reporting methods and investigation? Could we as a collective society be gullible and less intelligent than we think in believing what we’re told? Should we even be asking these questions?

Move along. Move along. Nothing to see here. 9.8% unemployment. “Pay no attention to the wizard behind the curtain.” “These aren’t the droids you’re looking for.” Change the channel. Who’s on Dancing With The Stars tonight? That is all.

What numbers are you going to believe?